Pitfalls of a Payday Loan

The media, press, financial advisors and many people have a lot to say about payday loans. Most people seem to be against them, but there are still many people who use them and seem to see benefits from them. However, it is really important to approach them carefully.

One of the problems with payday loans is that they are relatively easy to get. You do not need a credit check and so as long as you are old enough and have an income you will be likely to have your application approved. They are also very fast which means that they can be more appealing than more mainstream forms of borrowing such as credit cards and overdrafts. The fact that there is no credit check means that they could also be the only form of borrowing available to some people as well. This speed not only makes them more appealing than some cheaper alternatives but it also means that you have no time to properly think through your decision to borrow. You normally have to wait a while and this may give you time to think through things and decide that maybe the loan is not the right thing for you at this time anyway.
Not thinking things through can also mean that you end up not having enough money to pay the loan back. This can be a particularly bad problem with payday loans because the fees for missing the repayment are extremely high. They do try to ensure this does not happen, by organising a direct debit on your payday so that the money you owe comes out and you should have enough to cover it However, if you have other bills that come out on that day as well, you could find that there will not be enough money there and you do not pay it when due. This will be very costly as the lenders tend to start applying fees very quickly and they will soon add up meaning that you can soon owe a lot of money. If you have to wait until your next payday then you could end up with a huge debt. You therefore need to be really sure that there will be the available money there to repay the loan so that this does not happen to you. Some people will even get another payday loan, from a different company so that they can pay off the other one. This can lead to trouble very quickly as it is likely that they will not be able to pay that one back either and they may even get a third to pay for it. In the end there will be a lot of debt with no way of paying it back.

Therefore you do need to think very carefully about the amount of money that you are borrowing and how capable you are at paying it back. Consider what bills you already pay each month and whether you could afford to pay back a loan and whether you could then manage financially until you are pad next, having paid the bills that you have to and the loan repayment. Payday loans usually make you pay everything you borrowed plus the interest all back in one go and that means that you have a big sum of money to find. Some people may be able to manage this, but for many it could not be easy and so it is worth thinking hard about whether you would personally be able to manage this.

So a payday loan can seem really great in theory and as long as you pay it back in full and on time, you should be okay. However, if there is a risk that you will not be able to pay it back, then you could find yourself in trouble. It is also worth thinking about the fact that there may be cheaper ways to borrow. They may not be as easy or as quick, but they could save you a lot of money and so are well worth considering. Take as much time as you can to do some research and then you will be able to find the best way to borrow for you.